Many parents are willing to make financial sacrifices for their children to succeed in life, but where do we draw the line between just helping out and jeopardizing our own futures? According to a recent study by Merrill Lynch, parents are spending twice as much on their adult children than they are saving money for their own retirement. Here are the need-to-know statistics from the study, focusing on how parents engage with their children financially.
79 percent of parents continue to provide financial support to their children into adulthood, funding everything from everyday expenses like groceries to things like their education and weddings. This support adds up to $500 billion annually in the U.S., which is double the amount that parents contribute to retirement accounts at only $250 billion per year. Parents have become increasingly aware that they are sacrificing their financial security for the sake of their children and are looking for ways to teach their kids to be financially independent.
72 percent of parents want help educating their children about investing. Aside from the recognized need for personal finances to be taught in schools, parents are beginning to teach their kids the basics of saving, budgeting, and goal-setting with allowances. These skills help develop a sense of financial independence and responsibility early on, reducing the likelihood that children will become reliant on their parents as they enter adulthood.
Why taking shortcuts in financial planning can be detrimental to advice quality
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Combining emotions and finances can lead to poor decisions that might compromise parents’ financial futures. In fact, three out of four parents put their children’s interests ahead of their own financial needs. In order to ensure clients do not jeopardize their retirements, advisors should act as an educational resource for families. Developing comprehensive financial plans for the parents which can be adjusted as their lives change, is the first step towards retirement success. Once a child is old enough to become financially independent, advisors can create simple financial plans with a budget and set goals to help guide decision making.
NaviPlan financial planning software scales to meet the unique needs of each client and simplifies plan presentation so clients can visualize how different saving and investment strategies will impact their retirement coverage. This flexibility allows firms to efficiently serve young clients while setting a foundation for their plan to grow upon over time.
To learn more about how NaviPlan can help advisors and their clients make informed financial decisions, click here.